THE BANKS were likely to gain more from the Government’s proposed mortgage settlement proposals than if the debtor went through a bankruptcy process, Minister for Justice Alan Shatter has said.
Mr Shatter said it was “the most radical reform of our insolvency laws since the foundation of the State”. It met a “very important commitment” in the programme for government and the EU-IMF agreement.
The Insolvency Bill makes provision for the establishment of an insolvency service to operate the arrangements, which will allow consumers to deal with small personal debts and mortgages under non-judicial arrangements. In some cases parts of mortgages may be written off.
Mr Shatter said the legislation was one of a number of measures recommended in last October’s Keane report on mortgage arrears..
Mr Noonan said the Department of Finance had engaged with the Central Bank and the banks and “they have been involved in the process all the way and they are now in full agreement with this process.”
Minister for Justice Alan Shatter said the Personal Insolvency Arrangement (PIA) was a mechanism for dealing with mortgage debt “on an agreed basis and then the alternative is the bankruptcy approach, in the context of this legislation.”
The Bill proposes the appointment of personal insolvency trustees who Mr Shatter said “could come from a broad range of people with different skills, eg. accountants, lawyers, there’s a whole broad range of people who might fall into that category.
“Essentially they are performing the role of financial intermediaries. We do have legislation at present which regulates the conduct of financial intermediaries and that’s now an issue to be addressed by the Department of Finance to provide for the regulation and oversight of personal insolvency trustees.”
Asked if the arrangements would allow people, in certain circumstances, to walk away from their mortgage debt after the six-year term, Mr Shatter said: “No . . . what you’re doing is providing a window over a number of years for people, to put it simply, to get their finances back in order.”
He said the hope would be that by the end of six years “they’re in their homes, their unsecured debt has long since been dealt with, they are now in a financial position where they can cope with making whatever payments arise in relation to secured debt and . . . , they haven’t gone through a judicial bankruptcy situation and they can get on with their lives”.
He added: “The attractiveness for a bank or financial institution in the PIA is, it holds out the prospect that, over a period of years, monies due will be paid; it may well be that some of the outstanding capital has to be written down.”
Asked what the likely annual take-up from borrowers to the different measures would be, Mr Shatter said: “We’ve done a rough estimate which is that in the region of 10,000-plus applications may be made for non-judicial debt settlement. We would expect in the context of the certificate system, in the region of 3,000-4,000.
He added: “In the context of the bankruptcy areas, the estimate is we may see in the region of 3,000-4,000 bankruptcies a year, rather than 20 to 30 bankruptcies a year.”
